investment climate brochure_ethiopia.pdf

7/25/2019 Investment Climate Brochure_Ethiopia.pdf

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EUROPEANU

NIONBUSINESSFO

RUM

ETH

IOP

IA

ETHIOPIAAN ATTRACTIVE DESTINATION FOR

EUROPEAN DIRECT INVESTMENT


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BizClim is a programme of the ACP Secretariat funded by the European Union. This document has been produced with the financialassistance of the European Union. The views expressed herein can in no way be taken to reflect the official opinion of the European

Union nor the ACP Secretariat.


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CONTENTS

TABLE OF CONTENTS4 Ethiopia at a Glance

5 Ethiopias open Economy

Seeks InvestorsMajor Infrastructure Projects

16 Why Invest in Ethiopia

18 Attracting Foreign

Investment

21 Strong European Presencein Ethiopia

24 Cases of European CompaniesActive in Ethiopia

29 The EU Business Forum inEthiopia (EUBFE)


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ETHIOPIA AT A GLANCE

Population:

95,000,000 (2014 Estimate)

Life expectancy at birth:

60.75 years

Urban population:17% of total population (2011)

Ethnic Groups: Oromo34.4%, Amhara (Amara)27%, Somali (Somalie) 6.2%, Tigray(Tigrinya) 6.1%, Sidama 4%, Gurage2.5%, Welaita 2.3%, Hadiya1.7%, Afar (Affar) 1.7%, Gamo 1.5%,Gedeo 1.3%, Silte1.3%, Kefficho 1.2%, other10.5% (2007 est.).

Religion:

Ethiopian Orthodox 43.5%,Muslim 33.9%, Protestant 18.5%,traditional 2.7%, Catholic 0.7%,other 0.6% (2007 est.).

Literacy: 39%

GDP: $55 billion (2014 est.)

GDP - real growth rate:

10.3% (2014 est.), 8.5% (2012 est.),11.4% (2011 est.)

GDP - composition, by sector of

origin: agriculture: 40%;industry: 14.2%; services: 46%(2014 est.).

Agriculture products: cereals,pulses, coffee, oilseed, cotton, sugarcane, potatoes, chat, cut flowers;hides, cattle, sheep, goats; fish.

Industries: food processing,

beverages, textiles, leather, chemi-cals, metals processing, cement.

Industrial production growth rate:

9% (2013 est.)

Labour force:

45.65 million (2013 est.)

Labour force - by occupation:

agriculture: 85%; industry: 5%;services: 10% (2009 est.)

ETHIOPIA AT A GLANCE

Photo: Wikimedia Donald Macauley


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Ethiopias Prime Minister,Hailemariam Dessalegn,believes that Ethiopias

rapid economic growth can reacheven higher levels with the support offoreign investments.

He stated that Ethiopia should beassisted in its effort to introducebroad-based industrial developmentand in attracting direct foreign invest-ment [] the nation is under

transformation from agriculture to anindustry-led economy in its endeav-our to become a middle incomecountry. To support this majortransformation, the government isencouraging Foreign Direct Invest-ment (FDI) in various sectors, for themutual benefit of both local and inter-national investors.

In order to advance its economicdevelopment strategy, the govern-

ment has put in place several

incentives to encourage foreigninvestment (p.19 - 20) When theseincentives are considered alongsidethe significant natural advantages ofEthiopias varied landscape, and theabundance of unexploited water andnatural resources, we can appreciatewhy Ethiopia is rated by many interna-tional investors as an attractivebusiness destination.

In addition, the government has dedi-

cated significant resources to makethe case for investing in Ethiopia.According to the Ethiopian Ministry ofForeign Affairs (MoFA), Ethiopiaseconomic diplomacy has made the countrya desirable investment destination.

By taking advantage of the incentivesand of the real business opportunitiesoffered by this vast and beautifulcountry, foreign investors make goodprofits while helping the countrys

economic development.

ETHIOPIAS OPEN ECONOMY SEEKS INVESTORS

ETHIOPIAS OPENECONOMY SEEKS

INVESTORSEthiopia is on the move - Investors will help

Ethiopia become a middle income country


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Ethiopia is at a cornerstone of itsmodern development history and hasset itself the ambitious aim of reach-ing middle income status by 2025. Thecurrent GTP is coming to an end thisyear and a new one is being preparedfor the period 2015-2020.

While a lot has already been achieved,the next GTP agenda will undoubtedlyrequire a significant contribution ofthe private sector which dependsupon appropriate measures toencourage operating companies, andSMEs in particular, to expand, as wellas new private sector actors to settlein Ethiopia and stay.

We all agree that Ethiopia is a country

of opportunity with one of the highest

growth rates in Africa, a large poten-tial market, cheap labor force, as wellas strong public investments in eco-nomic and social infrastructure. Yet,while more and more EU companies

show a strong interest in investing inEthiopia, still too few of them actuallystay for the longer run.

Addressing the key challenges facedby the private sector requires a trulyenabling business environment, anenhanced coordination within theEthiopian administration, an effectiveforum for the private sector to voiceits concerns as well as some policyadjustments. But first and foremost, it

requires a clear acknowledgementthat private sector is indeed theengine of future economic growth.

I trust that the time is right and theEU, as a key partner of the Govern-ment of Ethiopia, is ready to workfurther on these challenges in theframework of our longstanding com-mitment to Ethiopia with the aim ofcontributing to the development andtransformation of this great country.

The work undertaken in the frame-work of the EUBFE is part of thatcommitment together with our devel-opment cooperation instruments, ourdeep and historical trade relationswith Ethiopia, as well as our coopera-tion in the areas of research, highereducation and science.

From a trade point of view, the EUremains the first trading partner of

Ethiopia as well as an important

investor in Ethiopia as was illustratedlast year with the organization of thefirst EU Joint Investment Mission.

EU investments generate the highest

permanent jobs ratio in the key GTPsectors of manufacturing and agricul-ture, they also work more with jointventures and they are renowned forthe quality of their production as wellas for the technology and know-howtransfer they inject in the Ethiopianeconomy.

I believe that the 300 EU companiespresent and operating in Ethiopiashould be listened to as they are the

best ambassadors and in a position toinfluence the decision to invest of theincreasingly frequent trade and invest-ment missions coming from Europe.

I have witnessed the efforts under-taken by the group of committed EUentrepreneurs who, for the past twoyears and together with MemberStates Embassies, have worked tomake the EUBFE a reality under theeffective and committed leadership of

its President.

Im confident that this continuous,open and constructive dialogue withthe Government of Ethiopia placedunder the effective guidance ofDeputy Prime Minister Dr Debretsionand with the active participation of theEthiopian Investment Commissionwill indeed lead to further improve-ments of the countrys businessclimate to the ultimate benefit of the

Ethiopian people.


EU Delegation's foreword:the time is right to boost the potential of privatesector as an engine for growth

H.E. Ambassador Chantal HebberechtHead of the EU Delegation to Ethiopia


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Ethiopia is a large country with anarea of 1.14 million sq.km. It is strate-gically positioned in the Horn ofAfrica, close to important markets in

Sudan, Egypt and, across the Red Sea,Saudi Arabia and the Gulf Countries.With more than 90 million inhabitants,Ethiopia has the second largest popu-lation of any African country, afterNigeria. The economy grows at a veryfast clip; almost 9% GDP growth overthe last four years. This impressiverecord makes Ethiopia one of thefastest-growing economies in theworld. In fact, it was the fastest-growing non-oil-dependent African

economy in the years 2007 and 2008.

Going forward, Ethiopia is planning todevelop its significant water resources,the largest in Africa. Indeed, 14 majorrivers pour off Ethiopian mountains.

While much remains to be done inorder to develop the irrigation sys-tems that will help agriculture in amore significant way, the abundanceof water is a major strategic asset forEthiopia.

As a recent IMF Report put it:Ethiopia is pursuing a developmentstrategy focused on promoting growththrough high public investment. Thestrategy involves concentrating gov-

ernment expenditures on human

capital and social sectors and a dom-inant role for public enterprises inundertaking critical infrastructureinvestments. The authorities adopted

a 5year Growth and TransformationPlan (GTP) in November 2010, whichaimed at average annual GDP growthof over 11 percent and achieving theMillennium Development Goals (MDGs).Among its main pillars are raisingagricultural output and productivity,promoting industrialization, andinvesting heavily in infrastructure.

Economic performance in recentyears has been strong, with economic

growth averaging in double-digits

Mark Lowcock, Permanent Secretary,Department for International Develop-ment, United Kingdom

Its always a source of wonder for mehow much Ethiopia has changed.Yours is a country of incredible achieve-ments and diversity. From the greenand fertile plains of the highlandregions. To the dry camel-filled SomaliRegional State. From the almost super-natural landscape of the Danakil. To

the jaw-dropping vistas of the SimienMountains [] One of the things thathas brought this most diverse ofnations together has been the singular-ity of vision. Ethiopias success, overthe past decade in particular, has beento maintain that vision. And turn it froma dream into a living, breathing, and for-ward looking reality.

In the last 30 years life expectancyhere has increased by 50%. Ethiopiais on track to meet most of the Millen-nium Development Goals. You haveachieved the infant mortality goal 2years early. Economic growth, in dou-ble digits, has been impressive. Allthe more so because, unlike otherparts of the continent, it hasnt beendriven by commodities alone. Percapita income has doubled.

I spoke to farmers whose land tenure isbeing made more secure, to small shop-keepers benefiting from micro-financein Addiss outskirts and to workers at astate-of-the-art leather factory.

I have heard first hand from a range ofEthiopian firms and foreign investorsabout the increasing attraction of

Ethiopia as a place to do business.Drawn by Ethiopias sustained eco-nomic success, the size of its growingmarket, and its potential as a location

for production, a range of industriesare emerging that barely existedwhen I first visited.

I have seen, for example, a successfulvegetable producer, who exports pro-duce to the EU. And Ive met with ahost of UK firms who are being drawnhere, from leather glove makers, toclothes retailers to drinks manufac-turers. This is both to their benefit,and that of Ethiopia, which stands to

gain from their financial investment,creation of jobs and sharing of bestpractice. I think that that the stridesthat you have made towards develop-ment and shared prosperity makeEthiopia one of the worlds greatdevelopment success stories of thelast twenty years. (From a speechdelivered in December 2013).

MACRO: getting to know Ethiopia

as a growing economy

A new country


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since 2004. Although initially led byagriculture, growth has been broad-based, with a rising contribution fromthe services sector and some degreeof export diversification.

Likewise, a USAID country report israther optimistic on Ethiopias future.

On the economic front, the last sevenyears have witnessed acceleratedreduction of poverty and increasedeconomic growthGrowth figuresreported by the World Bank and Inter-national Monetary Fund of over 8%are very good. The Economist maga-zine recently recognized Ethiopia asone of the fastest growing economiesin the world.

Progress is particularly occurring in

the critical finance and telecommuni-cations sectors: private banks havegrown to 40% of total financial assetsheld and are set to overtake statebanks in size. The state monopolytelecommunications sector is tem-porarily handing over its managementto France Telecom, although improve-ments have yet to be achieved.

A number of ambitious new pro-grams have been launched, with the

new 5-year Growth and Transforma-

tion Plan (GTP): 2011-2015 setting tar-gets for annual economic growthrates of over 14% and concomitantrapid expansion of services and infra-structure. Achieving even a portion ofthese targets would be commendable

On economic growth, Ethiopia

obtained commendable levels overthe last five years, and the govern-ment has developed comprehensiveagricultural and overall economicdevelopment plans, with the advan-tage of low wage rates and untappedsavings outside of formal financialinstitutions to foster domestic andexport growth.

It has been truly remarkable thatEthiopia has achieved the growth lev-els that it has realized thus far. Theopportunity exists to amplify more pri-vate sector investment in theeconomy, which would be instrumen-tal in accelerating and reaching thegrowth targets.

Last but not least, it should be notedthat Ethiopia in December 2014 suc-cessfully issued US $ 1 billion worthof bonds. As Reuters commented:The countrys debut dollar bond mayhelp fund future infrastructure projects.

There has been

tremendous growth in

the number, diversity

and market share of

private businesses in

the Ethiopian economy.


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In order to meet the challengesof growth, the governmentis engaged in major infra-

structure projects. By far the mostimportant is the Grand EthiopianRenaissance Dam, (GERD) hydropowerproject now under construction(www.grandmillenniumdam.com).The builder is Salini Impregilo, a well-

established Italian construction and

civil-engineering firm headquarteredin Milan, with a long track record ofinfrastructure building all over theworld, including other major projectsin Ethiopia. The estimated total cost isUS $4.8 billion.

What is truly remarkable is that theEthiopian Government is planning to

finance almost the entire project by

itself. The turbines and the equipmentrelated to them (about US $1.8 billion)will be financed by China. Still, thisleaves about US $3 billion that will bepaid for by state, with the help of tar-geted bonds aimed at Ethiopians athome and abroad.

When completed, GERD will be thelargest hydroelectric power plant in

Africa and the eighth largest in theworld, sharing the spot with the Kras-noyarsk Dam in Russia. At 63 billioncubic metres, the reservoir will beone of the largest of the continent.When completed (estimated date July2017), GERD will deliver 6,000megawatts.

Combined with the expansion of otherpower generation facilities, such asGilgel Gibe III, GERD will allow

Ethiopia to export power to its neigh-bours, (Sudan, Egypt and Kenya).Electricity exports will contribute in asignificant way to offset the countrystrade deficit.

It should be noted that Ethiopia is notinvesting only in hydropower. Thereare also geothermal projects (withReykjavik Geothermal), wind (Ashe-goda farms with the French companyVergnet) and also biomass ventures.

MajorInfrastructure

Projects


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ETHIOPIAS OPEN ECONOMY SEEKS INVESTORS0

Water for agriculture

If abundant water resources are criti-cal to develop hydroelectric projects,water is also a fundamental assetthat will allow the development ofEthiopias vast potential in agriculture.

Ethiopia is very lucky in this respect.According to the Food and Agricul-tural Organisations of the UnitedNations (FAO), Ethiopia is endowedwith a substantial amount of waterresources. The surface water resourcepotential is impressive, but little devel-oped. The country possesses twelvemajor river basins, which form fourmajor drainage systems.

Indeed, Ethiopia has plenty of water.

However, only a small percentage of

its water resources have been devel-oped and adequately utilised. Doingso will require significant investmentsin new, state-of-the-art technologies.This represents an opportunity forEuropean and other firms specialisedin this critically important sector.

Fully aware of this valuable asset rep-resented by a large water potential,the Ethiopian Government is offeringincentives to foreign companies will-ing to invest in this high value,promising sector. Indeed, through theconstruction of new dams and mod-ern irrigation systems there will benew ways to exploit Ethiopias waterfor various purposes, such as agricul-ture. For instance, the increasing

demand for electricity for crop cultiva-

tion as well as manufacturing couldbe in part met through additionalhydropower.

Given all this, foreign companies withthe necessary know-how in watermanagement and hydropower tech-

nologies will find major businessopportunities in Ethiopia, while at thesame time greatly contributing to thecountrys economic development.This is a classic win-win proposition.

In its efforts to support agricultureand economic development, theEthiopian Government is planning tobuild 5,000 km of railroad track. Thegoal is to connect agricultural produc-tion areas and new planned industrial

areas to cities and key regional ports.


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ETHIOPIAS OPEN ECONOMY SEEKS INVESTORS 1

Agriculture, employing more than

80% of the population, plays a key rolein Ethiopias economy, with greatopportunities for an even greaterexpansion. Agriculture accounts formore than 40% of national GDP and90% of exports.

Improved use of land and greater pro-ductivity mean higher standards ofliving for all Ethiopians, and increasedfood security for the poor. With sup-port from the Bill and Melinda Gates

Foundation, the Ethiopian Govern-ment established the EthiopianAgricultural Transformation Agency(ATA) as the state agency in charge ofspearheading agricultural growth andthe introduction of innovative prac-tices in the sector. Here is how theATA describes its mission:

Building on the impressive gains ofthe preceding decade, Ethiopias FiveYear Growth and Transformation Plan

(GTP) established ambitious targetsfor the agriculture sector for 2011-2015. The Plans objectives focus on

enhancing productivity and produc-

tion of smallholder farmers andpastoralists, strengthening marketsystems, improving participation andengagement of the private sector,expanding the amount of land underirrigation, and reducing the numberof chronically food insecure house-holds. By collaborating with astrategic array of related partners, theAgricultural Transformation Agency iscommitted to helping achieve the tar-gets of the GTP through its three

primary focus areas: value chains, sys-tems, and special initiatives.

The ATA strategy is articulatedthrough Value Chain Programmesand System Programmes. Projectsinclude the Ethiopian Information Sys-tem, Public Private Partnerships(PPPs) and Financial Inclusioninitiatives. (For more details, seewww.ata.gov.et).

About 66% of the Ethiopian land iswell suited for agriculture, and 3.7million hectares are perfect for irri-

gated agriculture. In Ethiopia, thereare 18 major agro-ecological zones,and 62 sub-zones. These areas aresuitable for planting 146 differentcrops, ranging from cereals to pulses.

However, out of the total potentiallyirrigable land, as of today, only 5% or107,265.65 hectares are irrigated.Therefore there is a great opportunityfor new foreign businesses interestedin developing this vast agriculturepotential.

More broadly, the Government ofEthiopia (GoE) is focusing on support-ing agriculture by constructing

farm-to-market roads, by enactinglaws aimed at securing title to land,and by the creation of business pack-ages aimed at supporting exportcrops. This will include fruits and veg-etables, fresh cut flowers and avariety of spices.

Main Agricultural Products

Ethiopias main crops are cereals,

pulses, oilseeds, vegetables, rootand tubers, fruits, fibres, stimu-lants and sugar cane.

Cereals include teff, wheat,barley and maize.

Pulses include faba bean, fieldpea, chickpea, haricot bean andlentils.

Oilseeds include sesame, ground-

nut, linseed, noug and gomenzer.

Vegetable, roots, and tubersinclude onion, tomato, cabbage,potato, pepper, carrot, enset,sweet potato and yams.

Fibre includes cotton.

Stimulants include coffee andtea.

Agriculture

Photo: USAID Africa Bureau


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Ethiopian Coffee: The

First and Still the Best

The coffee plant, Coffeaarabica is a species ofcoffee originally indige-

nous to the south-western highlands

of Ethiopia. It is also known as thecoffee shrub of Arabia, mountaincoffee, or arabica coffee. Coffeaarabica is believed to be the firstspecies of coffee to be cultivated,being grown in southwest Ethiopia forwell over 1,000 years. Coffee growswild in Ethiopia and this is the reasonwhy there are many more varietiesthan those found in other producingcountries, where coffee was intro-duced much later.

Production

Ethiopia is the world's seventh largestproducer of coffee, and Africa's topproducer, with 260,000 metric tons in2006. Half of the coffee is consumedby Ethiopians, and the country leadsthe continent in domestic consump-tion. The major markets for Ethiopiancoffee are the EU (about half of totalexports), East Asia (about a quarter)

and North America.

A Bloomberg news item (2014) indi-cated that there are good prospectsfor export growth. In fact, Arabicahas surged 71 percent in New Yorksince January after a drought hurtplantings in Brazil, the worldsbiggest exporter of the beans

Ethiopia earned $719 million fromsales abroad of the beans in the 12

months through July 7The countrymay produce about 500,000 tons ofthe beans this year, with about half ofthat crop sold outside the nationThe exporters association wants tobring in new buyers and start making abigger presence in the world market atits annual conference in Addis Ababa.

The total area used for coffee cultiva-tion is estimated to be about 4,000square km. However, the exact size is

unknown due to the fragmentednature of the coffee farms. The way ofproduction has not changed muchsince the 10th century, with nearly allwork, cultivation and drying, still doneby hand.

Regional varieties

Ethiopian coffee beans that are grownin the Harar, Sidamo, Yirgacheffe or

Limu regions are kept apart and mar-keted under their regional names.These regional varieties are trade-marked names with the rights ownedby Ethiopia.

Ethiopian Tea

Ethiopian tea is perhaps less wellknown than coffee, but it is of equallyhigh quality. Currently tea plantationscover 2,700 hectares and the annual

production is approximately 7,000tons. The areas that have high poten-tial for the cultivation of tea areSouthern Nations & Nationalities andPeoples (SNNP), Oromiya, Amharaand Gambella25. Although only blacktea is currently produced, there ispotential for growing all types of tea.Tea production is supported by proac-tive government action aimed atencouraging and increasing privateinvestment in tea plantations.

Ethiopia is CoffeeMore than 90% of the nations harvested coffee

is organically produced. The inherently superior

quality of Ethiopian highland Arabica coffee is

unmatched, particularly in flavour and aroma.


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Ethiopian Livestock:

Number One in Africa,

Tenth in the World

With the largest livestock populationin Africa and the tenth in the world,Ethiopia has a total of about 55.03 mil-lion cattle, 27.35 million sheep, and28.16 million goats. These figures donot include poultry, camels, horses,mules and donkeys, which are alsoimportant resources. More than 70%of the Ethiopian population gains its

income from livestock. Livestockaccounts for 15-17% of total GDP and35-49% of agricultural GDP.

The investment opportunities in thelivestock sector are meat and milkprocessing, dairy farming, livestockraising, fattening and livestock veteri-nary products.

Additionally, livestock also plays animportant role in Ethiopias leather

production, itself supported by a largenumber of tanneries. This potentiallylarge sector attracted the attention offoreign investors.

Leather products

Between 2006 and 2012, the totalvalue of Ethiopias exports of leatherand leather products grew from $66million to $112 million. If we consider

that the total number of Ethiopian

livestock is more than 110 million(this includes cattle, sheep, andgoats), creating leather products canbe a highly profitable business for anyforeign investors specialised in cloth-ing products. At present the EUimports 60% of the Ethiopianexported output.

A recent CNN (2014) story describedthe operations of a UK-based glovemanufacturer in Ethiopia:

The steady hum of sewing machinesfills the air inside a large glove-mak-ing factory on the outskirts of AddisAbaba, the bustling Ethiopian capital.Patches of leather move through anarray of working stations as busylabourers work feverishly to meet thecompany's export quota of 5,000gloves a day. The operation belongs toPittards, a UK-based company whosetrading partnership with Ethiopia

dates back to the early 1900s. Here,hardy, durable cowhide is made intowork gloves. These are ideal forbuilders and gardeners and aremainly exported to the U.S.

And then there are the stylishdesigns -- created from a differenttype of animal skin, these are made tokeep fingers warm in Tokyo, Paris andRome.

"The fashion glove is made of sheepskin which is unique to Ethiopia,"explains Tsedenia Mekbib, generalmanager at Pittards Products Manu-facturing. "The durability and thestrength make it popular for glovingleather specifically. That has beenthe one strength of Ethiopia and theleather sector."

Sophisticated designs with decorativetouches may be the hallmark of this

type of glove, but they must also be

practical. Ethiopia's climate makes

this animal skin effective at withstand-ing the winter chill - an essentialselling point. This effective materialis in abundant supply. Ethiopia's 110million cattle, sheep and goat popula-tion is one of the largest in the world,according to the United NationsIndustrial Development Organization.

Raw hides export ban

According to the same CNN story, in

a move to encourage value additionand increase revenue generated bythe leather sector, the Ethiopian gov-ernment banned all exports of rawhides and skins in 1989. Between2006 and 2012, the total value ofEthiopia's exports of leather andleather products grew from $66 mil-lion to $112 million.

And it is not just Pittards that realisedthe opportunity to make gloves in

Ethiopia. According to the LeatherIndustry Development Institute, twoother factories in the country arefocused on creating handwear.

Ethiopian leather is also used exten-sively for the creation of footwearproducts. The country is home todozens of shoemaking companies,including local names such as Olib-erte, and international players like theHuajian Group, a Chinese company

that has been exporting some 20,000pairs of shoes a month since itlaunched its manufacturing facilityoutside Addis Ababa in 2012.

Another growth area is representedby new domestic consumers. There isa growing number of Ethiopiansentering the middle class who showthe desire to buy high quality clothes.In a late 2014 report, the IMF said thecountry is on track to achieve its goal of

reaching middle income status by 2025.

Livestock and Fisheries

Photo: Wikimedia United States Department

of Agriculture, Author: Scott Bauer


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The trend is so clear that producersare now also targeting consumersinside the country. With a potentialcustomer base of 90 million people,there is good business potential forany company focusing on Ethiopias

growing domestic market.

Fish farming

Most of Ethiopias lakes create theopportunity for fisheries developmentfor both the domestic market andexports. The total fish catch potentialfrom these waters is estimated at40,000 tons per year.

Horticultureand Flowers

Ethiopia is an ideal place for theproduction and export of flowers, veg-etables, fruits and herbs. It is now thefourth largest supplier of flowers tothe world market. A noticeablegrowth has also been observed in the

export of vegetables, fruits and herbs.

Ethiopia has more than 122 billioncubic metres of ground and surfacewater. There are millions of hectaresof fertile land. The country has atrainable and disciplined workingforce, diverse agro-ecological zones,and supportive investment policyframeworks. Ethiopia also has afford-able electricity rates.

Besides, there is geographic proxim-ity to Europe, the Middle East andother markets. Due to the high vol-umes, Ethiopian Airlines has cargoplanes dedicated to flower exports.

Many of the investors (a vast numberof them European) engaged in thehorticulture sector have seen theirbusiness grow substantially, whilealso contributing to the economicdevelopment of the country. About 80

companies are involved in flower

farming over an area of 1,200 hectares.Most of the workers are women.

The principal export fruits are avo-cado, banana, guava, lemon, mango,orange, papaya and pineapples. TheEthiopian climate is suitable for alltypes of vegetables. The main exportsinclude green beans, okra, shallots,leeks, green chillies and lettuce.

TextilesThe textile industry accounts for 36%of all manufacturing in Ethiopia.Ethiopia identified 3 million hectaresof land with good potential for cottoncultivation. However, the land cur-rently used to grow cotton is a verysmall percentage of the total deemedto be suitable: only about 30 to 40,000

hectares.

Ethiopia grows some of the worldsfinest cotton. Ethiopia is now attract-ing international buyers and investorsthrough several government incen-tives, through a priority given todeveloping the textile and clothingindustry across the value chain, aviable business environment, andduty-free market access to both USand EU.

Some of the worlds best known retail-

ers, such as H&M and Primark, areamong the brands that are producingclothing in Ethiopia, while Tesco fromthe UK is planning to do the same.This opportunity to produce for Euro-pean markets is highly advantageousfor the countrys 60 garment factories,15 mills, 28 leather tanneries andshoe factories.

One of Ethiopias strategic objectives

is to increase product diversity andcategories across various parts of thevalue chain to build the backwardintegration and to open new marketaccess opportunities. There are sev-eral Ethiopian designers making itinto the regional and internationalfashion stage. Expect to see "Made inEthiopia emerging more and moreover the coming years.

SpicesThe fertility of the Ethiopian land ishighly suitable for a huge variety ofplants. Among the 6,000 types ofknown plants and trees 12% arefound only in Ethiopia.

Ethiopia is also particularly suitablefor growing spices. The leading spicecultivation areas are Amhara, Oromiya,

SNNP, and Gambella regions. It is esti-

Cattle, Goat and Sheep Population

0

10

20

30

40

50

60

70

80

Female

Male

Cattle Goat Sheep

55.38%

44.62%

70.98%

29.02%

72.72%

27.28%

DataSource:FDRECentralStatisticalAgency


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mated that the low lands have about200,000 hectares suitable for cultivat-ing spices. Spices are amongst theleading export products, with sesameseed leading the pack. In 2013, theInternational Fertility DevelopmentCenter (IFDC) reported that Ethiopiais the worlds second largest exporterof sesame exports are currently U.S.

$300 million per year and expected toincrease to $500 million in the nexttwo years. Ethiopian sesame farmsemploy over 500,000 workers duringthe peak season.

In Ethiopia, the use of spices andherbs is not only culinary; it is alsomedicinal. According to many experts,almost 80% of the Ethiopian popula-tion relies on traditional remediesbased on various medicinal herbs.

They also note that Western medicinehas become more focused on well-ness and preventative measuresbased on natural remedies. More andmore people are seeking alternative

curative practices that rely on indige-nous medicine based on plants.

The growing demand in Europe,America and elsewhere for new ther-apies that rely on spices and herbs

makes Ethiopia an ideal and prof-itable country for any companyengaged in alternative medicine.

TourismEthiopia has a variety of attractions,ranging from the natural beauty of theSimyen Mountains to the historic rockchurches of Lalibela.

Ethiopia has been ranked among thetop ideal tourist destinations for theyear 2014. Due to its mild climate andvaried landscape, with mountains,highlands, rivers and lakes, Ethiopiahas abundant wildlife and many vari-eties of plants and trees.

These natural gifts will bring into thecountry an even larger number ofvisitors. Indeed, figures indicate

increasing number of tourists inareas such as the Simyen Mountains.Many foreigners travel there in orderto see the Gelada baboons, found onlyin that area.

Ethiopia also attracts different typesof visitors. It hosts the headquartersof the African Union (AU), of theUnited Nations Economic Commis-sion for Africa (UNECA) and othermajor international organisations.

The large number of internationalmeetings and conferences organisedby these institutions fuel an expand-ing hospitality sector. Likewise, agrowing number of tourists visitingcultural and historical sites will needthe attention and care of many morespecialised tour operators.

The Ethiopian Government is deter-mined to make tourism one of thecountrys leading economic sectors,

and to make Ethiopia a top destinationin Africa. It is currently implementinga number of strategic measures todevelop the countrys tourism sectorfurther, including investment ininfrastructure, through the recentlyestablished Tourism TransformationCouncil, a new promotion body spon-sored by the Government.

Ethiopia is endowed with rich histori-cal relics which, combined with the

hospitality of our people, make it viablefor tourism. The government has linedup abled (sic) professionals to workwithin the industry and there is theright political will in place to contributetowards tourism, said PresidentMulatu to an official gathering in 2014.

During a recent visit, a World TourismOrganization official commendedEthiopia for the political supportawarded to the tourism sector.

Tourism is a key tool to lift people out ofpoverty and create new opportunities,he said. The steps being taken byEthiopia, namely enhancing the protec-tion and conservation of touristattractions, expanding the tourism infra-structure, establishing a tourismmarketing organization and a nationaltourism council as well as increasingeducation and training institutions in thefield of tourism, will surely make tourisma pillar of the development of Ethiopia.Holy Trinity Cathedral, Addis Ababa


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WHY INVEST IN ETHIOPIA6

Large population, low labour

cost, huge opportunities

Ethiopia has a popula-tion now exceeding 95million. This creates a

huge market, with a very large numberof consumers. Besides, because ofits very large workforce, the Ethiopiancost of labour is much lower than inthe rest of Africa. In fact, it comparesfavourably with many Asian countries.On top of that, the Ethiopian economyis expanding at a rapid pace, withgrowth rates around 9%.

When these factors a large internalmarket, low labour costs and anexpanding economy are combinedwith the significant array of natural

resources and the considerable amountof available land (arable land aloneaccounts for more than 66% of theentire country), it becomes clear thatthere is room for additional growth.

Ethiopias economic boom has led tonew demand for goods and services,affecting all sectors, thereby increas-ing the need to bring to fruitionexisting natural resources. All thesetrends create ideal opportunities for

new investors.

Ethiopian Airlines

Additionally, Ethiopian Airlines, Africasbiggest airline, provides modern con-nections with the entire world. Theairline has been operating for morethan 67 years. It flies to more than 80international and 20 domestic desti-

nations. Its impressive cargo servicemoves goods to about 40 destinations.

This broad connectivity, ensured by amodern airline with extensive passen-ger and cargo services, makes it easyfor Ethiopian businesses and forforeign corporations operating inEthiopia to be ever more importantplayers in the global economy.

A very safe country

In addition, compared to other coun-tries in the African continent and alsomany other emerging markets,Ethiopia is a very safe country. Visi-tors feel safe.

Safety is one of the reasons whyEthiopia has become a preferredvenue for many international confer-ences and conventions. Foreignvisitors feel comfortable and at home

while in Ethiopia.

WHY INVEST INETHIOPIA

hoto: Flickr 401(K) 2012


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WHY INVEST IN ETHIOPIA 1

Eight good reasons

for investing in

Ethiopia

According to the Ethiopian ForeignMinister, Dr. Tedros Adhanom, thereare eight reasons why foreignersought to invest in Ethiopia:

Political and social stability, a sup-

portive macroeconomic policy,strategic geographic position, abun-dant labour force, appropriate legalframework, competitive incentives,lowest corruption levels, and a sup-portive environment for foreign directinvestment.

Ethiopias main

advantages

Ethiopia has opened its doors to for-eign investors, and the governmenthas rolled out several attractive incen-tives to encourage foreign investmentin Ethiopia.

Former MoFA spokesperson, Ambas-

sador Dina Mufti explains thatEthiopias main advantages are basedon export, investment, tourism, tech-nology transfer, and developmentassistance.

Foreign leaders are

accompanied by

investors

Additionally, former MoFA DiplomacyDirector General Kebede Abera statedthat, in order to facilitate foreigndirect investment, MoFA is workingclosely with the Ethiopian InvestmentCommission (EIC) and the Ethiopian

Chamber of Commerce and SectorialAssociation.

He also highlighted that the very factthat various world leaders come onofficial visits accompanied by groupsof investors is evidence that Ethiopiasdiplomatic efforts are working, andthe figures prove this. As Mr. Aberaindicated, the number of foreigninvestors in Ethiopia was about 365 in2012; but in 2013 it had increased to

more than 1,000.

Local Welcome and Support:Strong policies to enhance investment climate

Ethiopian Foreign Minister, Dr. Tedros Adhanom Former MoFA Spokesperson, Ambassador Dina Mufti Former MoFA Diplomacy Director General,Kebede Abera


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ATTRACTING FOREIGN INVESTMENT8

The Ethiopian InvestmentAgency (EIA), a governmentagency, was established

in 1992 to promote private investment,primarily foreign direct investment.

The EIA mission was stated as follows:

To enhance investment, both foreignand local, in the country by promotingits resource potentials and invest-ment opportunities, initiating policyand implementation measures to cre-ate conducive investment climate andproviding efficient services to investorsso as to bring fast and sustainableeconomic development in the country.

The new Ethiopian Investment Com-mission (EIC), launched in October2014, will continue the good promo-tion and marketing work performedby the EIA, but on a larger scale.

Indeed, the EIC has an expandedmandate that includes broader mar-keting strategies and serving as aone stop shop for foreign investors,this way expediting all procedures

necessary to get a new business ven-

ture funded by foreign investors offthe ground. As a story in Addis For-tune stated: Besides having betterpromotional value, the EIC also offersnever-before-given services, such as

work permits to foreigners, duty freeprivileges, centralised trading servicesand additional notarisation servicesthat lessen the strenuous process ofinvesting. This means that processesthat previously took weeks, evenmonths, will now take a week or less.

The EIC aims to increase its invest-ment promotion efforts, so thatEthiopia will soon become one of theten leading investment destinations in

sub-Saharan Africa countries.

A brand new website for the EIC hasbeen developed, with technicalassistance provided by the EuropeanUnion through BizClim. (See:www.investethiopia.gov.et ). The newsite provides easy to use informationabout Ethiopia and about investmentopportunities. The new site willattract more visitors and additionalinvestments.

The main services

provided by the EIC

include:

Promoting the countrys investment

opportunities and conditions to for-eign and domestic investors;

Issuing investment permits, businesslicenses and construction permits;

Notarizing memorandum and articlesof association and amendments;

Issuing commercial registrationcertificates as well as renewals,amendments, replacements or can-

cellations;

Effecting registration of trade orfirm name and amendment, as wellas replacements or cancellations;

Issuing work permits, includingrenewals, replacements, suspen-sions or cancellations;

Grading first grade constructioncontractors;

ATTRACTINGFOREIGN

INVESTMENT:The Ethiopian Investment Commission


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ATTRACTING FOREIGN INVESTMENT 1

Registering technology transferagreements and export-orientednon-equity-based foreign enter-prise collaborations with domesticinvestors;

Negotiating and, upon governmentapproval, signing bilateral invest-ment promotion and protectiontreaties with other countries; and

Advising the government on policymeasures needed to create anattractive investment climate forinvestors.

In addition, the EIC provides thefollowing free, confidential and cus-

tomized services to investors:

Provision, through our website, var-ious publications, or through directresponse to investors inquiries, ofinformation on sector-specificbusiness opportunities, businessincorporation procedures andrelated regulations, employmentregulations.

Hand-holding and supporting the

investor during the acquisition ofland and utilities (water, electricalpower and telecom services); theprocessing of loans and residencepermit applications; the approval ofenvironmental impact assessmentsstudies for investment projects; andthe issuance of a tax identificationnumber (TIN).

The EIC is actively engaged in a fruit-ful dialogue with foreign investors.

Most notably, the EIC is now leading ahigh level Technical Committee withrepresentatives from both the EthiopianGovernment and the European UnionDelegation in Addis Ababa aimed atidentifying and correcting impedi-ments that may hinder the activitiesof European investors. On a relatednote, with the support of a BizClimfunded project aimed at strengthen-ing the European Business Forum inEthiopia (EUBFE), a public event was

held in Addis in October 2014 in which

a variety of issues linked to FDI andthe domestic business climate werediscussed by Government representa-tives, investors and internationalexperts.

The Ethiopian Investment Commis-sions investment promotion effortswill further strengthen Ethiopias

good results when it comes to attract-ing foreign investments. According toAddis Fortune, The World InvestmentReport released on Tuesday, June 24,2014, revealed that Ethiopia was the

third largest recipient of foreign directinvestment (FDI) in Africa in 2013,with a 240% increase from theamount in 2012. The report releasedby the United Nations Conference onTrade & Development (UNCTAD),

stated that the FDI inflow to the coun-try had reached 953 million dollars in2014, up from the 279 million dollarsit was in the previous year.

The net sales value of cross bordermerger and acquisition (M & A) in thecountry has also increased by morethan double to 366 million dollar in2013, from 146 million dollars in 2012.

Though the amount of FDI inflow in

the form of M & A has increased aconsiderable amount in the year, themajor part of the countrys invest-ment inflow comes from green fieldprojects, according to the report.

Public Led Economy

Specific sectors are liberalised for investment and marketing

Remittance out of Ethiopia from invested capital is permitted.

Remittance for principal and interest payment on external loans, pay-ments associated with technology transfer, proceeds from sales orliquidation of an enterprise, salaries and other payments are permitted.

Basic conditions

100% foreign ownership - $200,000 minimum initial investment requiredfor a 100% foreign investment.

$150,000 for foreign investor in a joint venture with a domestic partner.

$50,000 for foreign investor in a joint venture with a domestic partner forconsultancy or publishing businesses.

$100,000 for 100% foreign investment in the areas of engineering,accountancy, architecture, auditing related consultancy services or pub-lishing businesses.

$50,000 for foreign investors working in partnership with a local investorin the areas of engineering, accountancy, architecture, auditing relatedconsultancy services or publishing businesses.

$100,000 for a Trade Representative Office (TRO), an entity with a scope

limited to market studies, marketing and promotional activities.


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ATTRACTING FOREIGN INVESTMENT0

Other benefits

In addition, by investing in Ethiopia, aforeign company will also benefitfrom international trades agreementsthat Ethiopia is a party to. These

include: Everything But Arms (EBA),the African Growth and OpportunityAct (AGOA), the Generalized Systemof Preferences, and soon the freetrade agreement within COMESA.This would allow Ethiopia based com-panies to reach 19 African countries,with more than 400 million potentialconsumers.

Sectors

Many economic sectors are open toinvestors. Among them the EthiopianGovernment stresses the relevance ofmanufacturing. Here is a brokendown list drawn from an EthiopianGovernment internet portal:

Food and Beverages

Tannery, Leather Goods

Textiles

Glass and Ceramics

Chemicals and Chemical Products

Drugs and Pharmaceuticals

Paper and Paper Products

Building Materials

Electrical and Electronic products

Metallurgy

Manufacturing

Manufacturing is now at an earlystage of development. It covers about145 state owned and 643 private man-ufacturing industries of all sizes.These industries are mainly engagedin the production of food products andbeverages, tobacco products, textiles,wearing apparel, tanning and dress-ing of leather, footwear, luggage andhandbags, manufacturing of wood

and its products, manufacturing of

Security of Investment

Investment protection and guarantee.

Constitutional protection from expropriation.

Ethiopia is a signatory and member of the Multilateral InvestmentGuarantee Agency (MIGA).

Ethiopia is a signatory of the Convention on the Settlement of InvestmentDisputes between States and Nationals of Other States.

The Ethiopian Investment Commission (EIC) provides a professionalone-stop-shop.

Conducive Tax Environment

Corporate income tax (tax on profit) is 30%.

Excise tax is levied (minimum 10%) on selected local or imported products.

Turnover tax at 2% for priority sectors such as tractors, combine harvest-ing, grain mill etc. and 10% on other sectors.

Customs duty on non-exempted imports ranges from 0-35%.

Income tax ranges from 10-35% on monthly incomes of $16.50 and above.

Withholding tax is payable on imports at 3% of cost, insurance and freight.

15% VAT is payable on businesses with a turnover above $54,000.

Dividend tax (on income derived from dividends from a share company orwithdrawals of profits from a private limited company) at 10%.

Royalty tax (on income derived from technology and intellectual propertyrights) at 5%.

Capital gains tax - share of companies 30%; business, factory or officebuildings 15%; residences 0%.

Rental income tax (on annual rental income) between 0% and 35%dependent on level of rental income.

Stamp duty - Leasing 0.5% of value; registering title to property 2% ofvalue; contract of employment 1% salary; bonds 1% of value, etc.

Tax treaties to avoid double tax payment are signed with several countries,along with bilateral treaties for the protection and promotion of investments.

Foreign contractor withholding tax ranging from 10% to 30%.


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STRONG EUROPEAN PRESENCE IN ETHIOPIA 2

rubber and plastic products, manu-facturing of chemicals and chemicalproducts, manufacturing of othernon-metallic mineral products, man-ufacturing of basic iron and steel,manufacturing of fabricated metal

products, assembling of motor vehi-cles, trailers and semi-trailers. Aspart of the government effort tore-invigorate and revitalise themanufacturing sector, a new Industri-alisation Development Strategy hasrecently been adopted. The Strategyclearly identifies the priority areas ofthe manufacturing sub-sectors andput in place strategies that ensure thedevelopment of vibrant industries inthe country. Major manufacturing

opportunities offering attractivepotential benefits to prospectiveinvestors exist in the textile and gar-ment, food and beverage, leather andelectronic, building materials andnon-metallic mineral and metallicindustrial sub-sectors.

Challenges

Ethiopia is a country undergoing rapidchange. While there is a clear policy

consensus about the benefits ofattracting and welcoming more andmore foreign investors, the countrysinstitutions are still in the process ofbeing modernized. This shows ininternational rankings in whichEthiopia does not get high markswhen it comes to the easiness ofdoing business. (See the WorldBank Doing Business Annual Report).

That said, the Government is aware of

these shortcomings that affectEthiopias business climate, and itis in the process of addressing themthrough necessary reforms. At thesame time, The Ethiopian InvestmentCommission is proactively workingwith investors in order to minimizeany inconvenience or delays that mayresult from red tape and/or bureau-cratic bottlenecks.

STRONGEUROPEAN

PRESENCEin Ethiopia

Europe has a strongpresence in Ethiopia. Itis a key partner in

terms of economic and trade rela-tions. It is the first export market andthe second import market forEthiopia, making it the first tradingpartner as well as an importantinvestor.

Ethiopias exports to the EU are over

43% of its total exports, and morethan 21% of its imports. Through thislarge economic and trade partnershipthere have been significant technol-ogy transfers that have been mutuallybeneficial. This high level of EUinvestment has led to the creation ofmore than 100,000 new jobs for theEthiopians. On a visit to Brussels inApril 2013, Ethiopian Prime MinisterHailemariam Desalegn stated thatthe quality of European investment is

very good. Then EU Commission

President Manuel Barroso said thatEurope is very proud of its contribu-tion to Ethiopian development.

Many Europeans recognise thatEthiopia offers major business oppor-tunities. It has one of the highestrates of growth in Africa, a largepotential market, an inexpensivelabour force, and strong governmentinvestments aimed at improving eco-

nomic and social infrastructures.

Investments by EU companies gener-ate many permanent jobs in the keyGDP sectors of manufacturing andagriculture. EU companies oftenwork with Ethiopian counterpartswithin joint ventures. They bring toEthiopia important technologies andmodern management systems. Atthis time, there are about 300 EU com-panies operating in the country.


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STRONG EUROPEAN PRESENCE IN ETHIOPIA2

Their success stories are amongEthiopias best marketing tools toattract other potential investors.Indeed, by incentivizing a flow of trademissions from EU countries, theseinvestors are in a position to influencefuture investment decisions.

The EU engages the Government andthe private sectors via the EU Delega-tion, the Embassies of Member

Countries, and through the European

Business Forum in Ethiopia, (EUBFE),an organisation that brings togetherhundreds of European companies,large and small, that are currentlyoperating in Ethiopia.

By and large the Europeans workingin Ethiopia believe that they haveestablished an open and constructivedialogue with the Government ofEthiopia at many different levels. In

part because of this ongoing engage-

ment, much has been done toimprove the relationship which is get-ting stronger every year.

Even more will be achieved through

appropriate measures to encourageprivate sector development and tocreate an environment conducive toadditional FDI from Europe, so thateven more European firms will con-sider establishing or expandingbusiness activities in Ethiopia.

Many European observers expect thata strengthened business environmentand enhanced coordination withEthiopian public administration will

encourage even more European com-panies seriously to consider Ethiopiaas a good place to invest.

From this perspective, an effectiveforum for the private sector to voiceits concerns and advocate some pol-icy adjustments and other practicalmeasures will help the Governmentand the private sector in the ongoingeffort to create an even better environ-ment for foreign investors.

As a key partner, the EU stands readyto continue to support Ethiopia inreaching its objectives throughoutdevelopment cooperation instru-ments. The EU together with itsmember states is a key donor, con-tributing about 30% of the totaldevelopment assistance to Ethiopia.The EU remains strongly committedto continue supporting the Govern-ment efforts to unleash the enormous

power potential of the private sector.

More specifically, the EU is now fund-ing a project worth 35 million that

started in 2014. It is aimed at helpingto trigger Ethiopias economic trans-formation by policy fine-tuning andcapacity building, as well as by sup-porting intermediary organisationsand SMEs. The goal of this initiative isto help change the way in which the

public and private sectors interact.


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STRONG EUROPEAN PRESENCE IN ETHIOPIA 2

Recent examples of

positive interactions

between Europe and

Ethiopia

Here are recent examples of the richEurope Ethiopia relationship. Dur-ing the British Business Group (BBG)meeting, Greg Dorey, the United King-doms Ambassador to Ethiopia, saidthat Ethiopia has developed into ourbiggest bilateral development partnerin the world. And, from a low base,we have seen our trade and investmentrelationship take off dramatically too.

Furthermore, Ethiopias Prime MinisterHailemariam Desalegn and IrelandsPresident Michael D. Higgins signedseveral agreements in November2014 aimed at increasing bilateralbusiness relations. One is on avoid-ance of double taxation in order toimprove the investment relationshipbetween the two countries. Thenthere is a separate trade agreementthat will come into force in June 2015.There will also be direct Ethiopian

Airlines flights linking Addis Ababaand Dublin.

Local support

structure: The EU

Business Forum in

Ethiopia, EUBFE

The significant and growing EU busi-

ness presence in Ethiopia has led tothe creation of the EU BusinessForum in Ethiopia, an important initia-tive promoted by the EU Delegation inAddis Ababa. As the EUBFE websiteexplains:

Economic relations between Ethiopiaand the EU are strong, diversified andexpanding. The EU has been, and con-tinues to be, one of the main foreigninvestors in Ethiopia. There are cur-

rently several hundred EU companies

active in Ethiopia. They have mas-sively invested in the economygenerating economic growth, qualityemployment and technology transfer.

To further promote and enhance oureconomic ties, an EU Business Forumto Ethiopia was established in May2012 under the patronage of the EUDelegation to Ethiopia.

The EU Business Forum has sincebecome a respected unified platformof EU investors in Ethiopia, an excel-lent source of information for existingand potential EU investors, and hasbecome increasingly engaged in an

open and constructive dialogue withthe Ethiopian government on sys-temic issues affecting the businessclimate in the country.

Indeed, the EU Business Forumallows EU investors to pool forces andspeak with one voice and, as such, isfully in line with the vision of the EU tomaximize synergies between EUMember States and strengthen theEU collective impact.

The EUBFE was established in 2012in response to the need for both a plat-form for networking and informationexchange between EU businessesand a systematic dialogue channel

with the Ethiopian authorities. Thisexchange is on-going and has alreadyled to some concrete improvementsin the business climate in the country.The EUBFE believes that a continua-tion and further deepening of thisconstructive relationship of coopera-tion, exchange and better mutualunderstanding between the publicand private sector, will furtherimprove the business enabling envi-ronment, and ultimately allowing the

society to prosper.

Ethiopia has ambitious economic andsocial development targets, includingthe transformation of its economy.The EUBFE wishes to actively supportand contribute to the country's devel-opment endeavour by bringing in andexpanding high quality investmentsfrom EU companies and individuals,therewith creating jobs, transferringknowledge, earning foreign exchange

and accelerating growth.

Photo: Wikimedia Zaareo


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CASES OF EUROPEAN COMPANIES ACTIVE IN ETHIOPIA4

CASES OFEUROPEAN COMPANIES

ACTIVE IN ETHIOPIA

1. COMPANY NAME

Ethiopian Steel Profiling & BuildingPlc - (ESPBC)

2. COUNTRY OF ORIGIN

The Netherlands

3. BUSINESS SECTOR- COMPANY

PROFILE

Ethiopian Steel Profiling and BuildingPlc. (ESPBC) was established in 2003by a Dutch foundation called WorldWide Employment. ESPBC operatesin the steel sector. It started with theproduction of hydraform blocks andpre-painted corrugated sheet. Later,cold formed profiles were added for awide range of industries. Among allother applications of the cold formedprofiles, they fit perfectly with thehydraform blocks in such a way thatESPBC is able to supply all buildingmaterials that are necessary for a

building up to G+1.

In 2010, ESPBC invested in a slittingline, which is able to slit steel coilsinto small steel strips or to make anysize flat sheet in full automatic mode.Throughout the years many advancedmachines have been added to the fac-tory floor in order to meet thecustomers need for high quality prod-ucts. Two years later an investmentin an 'EGA line' was made in order tomeet the demand for EGA sheets.Now the company produces a widevariety of roofing sheets as per the

customers needs. Main products:columns, rafters, purlins, flat sheets,formworks, roof sheets, EGA sheets,corrugated sheets and hydraformblocks are amongst ESPBCs products.

4. WHAT PROMPTED THE DECISION

TO INVEST IN ETHIOPIA?

The main desire was to create jobopportunities in Ethiopia and to transfervaluable technology and know-how,while stimulating the local economy.

Ethiopian Steel Profiling &

Building Plc (ESPBC)


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CASES OF EUROPEAN COMPANIES ACTIVE IN ETHIOPIA 2

5. SIZE OF THE COMPANY

ESPBC is one of the top ten steel com-panies and manufacturers in Ethiopia.The companys initial capital invest-ment was $2.5 million; currently itstotal investment is $20 million and itsprofit after tax is 6-7% per year.

6. NUMBER OF EMPLOYEES

There are 90 employees. There arethree managers, excluding the Gen-eral Manager. Mr. Hans Walhoot isthe only foreigner. For the time being

the company is fully staffed, but newhiring is possible depending on mar-ket conditions.

7. GROWTH PROSPECTS

If we could go back, says the Gen-eral Manager, Mr. Hans Walhout, wewould have started on a much biggerscale, and we would have investedmore. The boom started 5 years ago.Due to Ethiopias high business poten-tial, I would probably establish more

business operations in the future. Aplan to establish additional invest-ment is currently under review. Andthere is a high probability of doing thisin the future. For starters, it will beabout adding capacity to the existingplant. There is no immediate plan toopen new factories in other parts ofthe country in the near future.

8. OVERALL IMPRESSION ABOUT

DOING BUSINESS IN ETHIOPIA

Ethiopia is a good market, with a

promising number of potential cus-tomers, says Walhout, An importantaspect about investing in Ethiopia isthat the government has a good atti-tude towards foreign investors.Besides, there is a very good lifestylein Ethiopia. I have four children, hecontinued, and here in Debrezeitthere is an international school thatmeets international standards; there-fore, it is very good for my children.The business is very good and it isgrowing. We are very satisfied!

Walhout is very positive about thisinvestment in Ethiopia. I am opti-mistic about the Ethiopian businessenvironment, he emphasised. Theeconomy and the market are growing,and the construction sector is boom-ing. Our relations with governmentagencies are good. We are not con-cerned about other firms operating inour sector. There is plenty of room formore competition. I would definitelyrecommend investing in Ethiopia tocompanies from other EU countries,especially in the manufacturing sec-

tor, because almost everything isimported here. There is tremendouseconomic growth, and when you con-nect growth with 90 million potentialcustomers, business activities holdhuge promise. Besides, compared toother African countries, in Ethiopiayou can run your business without anyconcerns about corruption. In theend, the Ethiopian economy and mar-ket are growing, and the constructionsector is booming. Therefore, for us

Ethiopia has an enormous potential.


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1. COMPANY NAME

Abyssinia Essential Oil Plc


Germany and Ethiopia


PROFILE

Abyssinia Essential Oil producesessential oils from eucalyptus, rose-mary, citronella, lemon grass andmore. The company is a joint ventureformed between two Ethiopians andone German. They have been success-fully working together for seven years.



The partners saw a good businessopportunity in this sector, becausemost oils used in Ethiopia areimported. Due to very high demandfor its products Abyssinia Oil is veryprofitable.


Abyssinia Essential Oils is one of thebiggest essential oils producers in thecountry. It ranks third in Ethiopia.The companys initial investment was25,000.


Abyssinia Oil currently has sevenemployees. It is run by Mr. BehailuKebede, the General Manger. Thereare no expats working directly for thecompany, except for Mr. Felix Ahelars,

the German shareholder. The com-pany is planning to hire more people,especially skilled workers who canoperate the machineries.

7. GROWTH PROSPECTS

The business is growing and the gov-ernment is cooperative; we are veryhappy, stated Mr. Kedebe. Westarted with a 200 distillation unit anddue to increasing demand we aregoing to increase the distillation unitto 500, he continued. There is a hugemarket for oil in the country. Thereare very few essential oil producersand these products potential is high.



According to management, AbyssiniaOil is doing very well. All its productsare quickly sold out, while there is stillunmet demand. There is room forother companies operating in thissector in Ethiopia.

In fact, this sector could benefit fromthe introduction of more sophisti-

cated, state-of-the-art technologiesand better know-how. Foreign com-panies that are at the cutting edge inthis essential oils business couldmake a very positive contribution,

while doing well for themselves.With 90 million people, the Ethiopianmarket is very large. Working condi-tions in our company are very good,says Kedebe. Overall, he concludes,we also have good relations with gov-ernment agencies. Besides, ours is arather labour intensive business, andlabour costs in Ethiopia are fairly low.

Abyssinia Essential Oil Plc


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CASES OF EUROPEAN COMPANIES ACTIVE IN ETHIOPIA 2

1. COMPANY NAME

New Wing Addis Shoe Factory Plc/New Wing Addis Shoe and Tannery


Italy


PROFILE

Shoe and leather products from sheep,goat and cattle skins. There are twofactories: one is located in Addis Ababa

and the other in Akaki. They have beenoperating for four years.



The owners have their shoe factory inChina; they contacted Mr. Evano Mes-fin, now the General Manager, andthey decided to get the operationstarted. Mr. Mesfin has nine years ofexperience in this field. Moccasins

are not produced in China. When theowners saw how they are made inEthiopia, they decided to buy a factoryand set up machineries to produceshoes for women. Currently the facto-ries undertake the finishing andproduction of shoes for women.


This is one of the biggest shoe facto-ries in Ethiopia and its ranking is

between second and third. The com-

pany has invested about three hun-dred million Birr so far (1 USD = 21Birr). The operation is still rathernew. More machinery will be pur-chased to expand operations.


There are 900 employees. Amongstthese there are five Managers and atotal of 25 foreign nationals workingat the factories. Once the expansion

is completed, there are prospects ofhiring between 300 and 500 more peo-ple in the second factory. There is agood ongoing relationship with all theemployees.

7. GROWTH PROSPECTS

Manpower and electricity costs arelow, says Mr. Mesfin. Furthermore,the leather in Ethiopia is not expen-sive and the fibres quality is one of

the best in the world. We are plan-ning to buy and open a third factory.The right time for investment inEthiopia is now!



The current opportunities offered bythe Ethiopian government are attrac-tive. The tax holiday (for green fieldnew investors there is a five year tax

exemption), and the duty free opportu-nity we have for all the materials weimport for our productions are amongstthe incentives we enjoy, added Mes-fin. The government agencies arevery cooperative. Furthermore, theLeather Development Institute andthe Industry Minister are very helpful.Ethiopia has a great potential inleather products. There are compa-nies that operate on an even largerscale than we do in this field.

New Wing Addis Shoe

Factory Plc/ New Wing

Addis Shoe and Tannery


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The EU Business Forumin Ethiopia aims toassist EU companies

active in Ethiopia to do business inthe country, through:

Improving the exchange of informa-tion on the Ethiopian business andregulatory environment,

Developing a platform for network-ing and forging business linkagesbetween EU companies, and

Being an effective channel for dia-logue with the various Ethiopianauthorities.

Services to Members

EUBFE services to members fall intothe following discrete but intercon-nected areas:

Information members are providedwith standard and member-specificinformation on how to establish andoperate an enterprise in Ethiopia incentives, licensing, taxation,employment and customs issuesetc. In addition, members are keptinformed about developments,progress, initiatives and eventsthrough a quarterly EUBFE newsletter.

Dialogue a platform for membersto debate specific issues and to agreeon the most effective strategies andactions to mitigate the negativeimpact upon investment of sector-specific or horizontal impediments.

Advocacy the undertaking of spe-cific studies on identified investmentimpediments and the developmentof position papers specifying theconcerns of members and lobbying

for mitigating actions to be taken.Facilitating high level discussionswith senior government officialsfrom relevant ministries and agen-cies and representatives of the EUDelegation and EU Member States.Commenting on proposed draft leg-islation and regulatory changes.

Events the EUBFE organises reg-ular networking and issue-specificevents, discussion forums, round

tables, consultation meetings, work-shops, seminars and conferencesthroughout each year. Facilitationof inward investment and businessmissions to Ethiopia from EUMember States.

EUR

OPEANU

NIONBU

SINESSFORU

M

ETHIOP

IA

The EU BusinessForum in

Ethiopia (EUBFE)

Contact EUBFE secretary at: [email protected]

Alternatively, visit: www.eubfe.eu



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All Africa Global Media. EthiopiaTops List of Ideal Tourist Destination

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Court, Alex and Leposo, Lillian.Made in Ethiopia: The leather gloveskeeping the world warm and stylish.Cable News Network (CNN). October15, 2014.

Embassy of Ethiopia: Economy andBusiness Section. Investing inEthiopia: Agriculture. Washington,D.C. www.ethiopianembassy.org.

Embassy of Ethiopia Economy andBusiness Section. Investing inEthiopia: 10 Reasons to Invest inEthiopia. Washington, D.C. 20008.www.ethiopianembassy.org.

Embassy of the Federal Demo-cratic Republic of Ethiopia. Tradeand [email protected].

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